
THE 

INDUSTRIAL 

REPUBLIC 



til W LITCHFIELD 




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COPYRIGHT DEPOSIT. , 



THE INDUSTRIAL REPUBLIC 



THE 
INDUSTRIAL REPUBLIC 

A Study in Industrial Economics 

BY 
PAUL W. LITCHFIELD 

Vice-President and Factory Manager, The Goodyear 
Tire & Rubber Company 




BOSTON AND NEW YORK 

HOUGHTON MIFFLIN COMPANY 

The Riverside Press Cambridge 
1920 



P-/ 






COPYRIGHT, I919 AND I92O, BY PAUL W. LITCHFIELD 
ALL RIGHTS RESERVED 



K 

©CI.A570326 1 



■9».-«ft» 



CONTENTS 

I. Expansion of Political Democ- 
racy 1 
II. The Labor-Capital Opposition — 

Genesis and Growth 16 

III. Present Status of the Labor- 

Capital Opposition 32 

IV. Clues to the Solution 45 
V. Rights involve Duties 51 

VI. The Industrial Republic 56 

VII. Industrial Citizenship 64 
V1LL The Goodyear Representation 

Plan 79 



THE 
INDUSTRIAL REPUBLIC 

• 

CHAPTER I 

EXPANSION OF POLITICAL 
DEMOCRACY 

AFTER four years of fighting 
between all the leading na- 
tions of the world to determine 
under what form of government 
people should live in the future, we 
would naturally look for an era of 
peace. Instead of this, we find a 
state of anarchy and civil war in 
some of the nations, and a feeling of 
industrial unrest in others. The fo- 
cusing of attention on the faults of 
political government has produced 
a similar focusing on the faults of 
industrial management. 



2 THE INDUSTRIAL REPUBLIC 

The result of this is an alarming 
state of affairs in Eastern Europe 
which is gradually spreading west- 
ward, and every effort should be 
made to determine its cause, to see 
what the points of misunderstand- 
ing are between management and 
men in industry, and to find out at 
what point the two sides can meet 
with fairness to both. 

As the conditions of civil war 
prevailing in Eastern Europe and 
the conditions of general unrest 
spreading westward are the direct 
outcome of the World War just 
finished, a proper understanding 
of the causes of this unrest necessi- 
tates a review of the war in the 
particular phases which have a 
bearing on the present industrial 
problem. 

Looking back to 1914, we find 
Germany a highly efficient empire, 



THE INDUSTRIAL REPUBLIC 3 

ruled by a small autocratic minor- 
ity, who, by efficient and progres- 
sive direction, had united a group 
of small states into a nation and 
made this nation very powerful. It 
reached a stage where it could pro- 
duce much more than it could con- 
sume and had to depend very 
largely upon the outside markets 
to sustain its rapidly growing pop- 
ulation. It found other nations in 
political control of these markets. 
The German nation had come to 
believe, on account of its rapid rise, 
productivity and power, that its 
"Kultur" was superior to any 
other upon earth, and that as a 
missionary it should give its bene- 
fits to constantly increasing areas 
whether the inhabitants desired it 
or not. The result was that after 
many years of preparation for 
world control, feeling itself capable 



4 THE INDUSTRIAL REPUBLIC 

of carrying its government by force 
of arms to other countries, it seized 
the first convenient opportunity 
and threw down the gage of battle. 
It engaged its immediate neighbors 
in a struggle of life or death. 

The initial advantage gained by 
Germany, owing to its state of 
preparation, followed by its bar- 
barous methods of warfare and ar- 
rogant assertion of its desires and 
intentions, first shocked and then 
aroused the leading self-governing 
nations of the earth to the danger 
threatening their own free institu- 
tions and future safety. The whole 
conflict took the form of a world- 
wide contest to see whether govern- 
ment should be by self-determina- 
tion, peoples having a voice in their 
forms of government, or whether 
a small autocratic minority should 
establish itself in the control of 



THE INDUSTRIAL REPUBLIC 5 

nations on the principle of " Might 
makes Right." 

Russia, one of the leading na- 
tions against Germany at the 
beginning of the war, revolted 
from the Government of the Czar 
and established a republic. Soon 
afterwards, the first Russian Re- 
public was overthrown by a second 
revolt and a Socialist Republic 
started. This was unable to main- 
tain itself, and a third revolt took 
place, throwing the Russian Gov- 
ernment into the hands of the pro- 
letariat. Conditions of civil war 
and anarchy became prevalent, 
and the new Government withdrew 
from the alliance of democracies, 
leaving that alliance facing both 
ways, fighting Autocracy on one 
hand and Anarchy on the other. 

The first issue, that of fighting 
autocracy, was settled in Novem- 



6 THE INDUSTRIAL REPUBLIC 

ber, 1918, by the triumph of de- 
mocracy. The second issue, that of 
fighting anarchy, has not yet been 
settled, it being the avowed inten- 
tion of the present Government of 
Russia to sow the seeds of discon- 
tent and civil war throughout the 
civilized world. 

The Russian Bolshevik declares 
his revolt to be not against political 
hereditary autocracy, but against 
capitalism. He calls upon the peo- 
ples of the world to arise and 
overthrow it. His remedy is the 
destruction of all capital, and he 
proceeds to build up an autocracy 
based on ignorance of the most 
cruel kind, setting back the clock 
by centuries and bringing about 
idleness and starvation. And the 
fact remains that he has succeeded, 
up to the present at least, in put- 
ting his ideas into absolute effect 



THE INDUSTRIAL REPUBLIC 7 

over a hundred million people of 
the white race. A state of peace 
cannot come on earth as long as 
this challenge remains unanswered. 

Bolshevism is an industrial dis- 
ease, and a very contagious one 
wherever it finds lack of confidence 
in the management of industry, or 
a feeling of injustice amongst work- 
ing-men with their present condi- 
tions. The problem which we must 
solve is to find a remedy for stop- 
ping the spread of Bolshevism. The 
first step toward this solution is a 
careful study and examination of 
the industrial situation, ferreting 
out any injustice which may be 
present, and establishing a feeling 
of confidence between the working- 
man and the management of in- 
dustry. 

The relations between a political 
government and the people living 



8 THE INDUSTRIAL REPUBLIC 

under that government are very 
similar to the relations between the 
management of an industry and 
the people working in that indus- 
try. In other words, management 
and government are synonymous 
terms, one being usually applied to 
the political and the other to the 
industrial world. Since this war has 
been fought to establish certain 
principles of political government, 
therefore, it is only natural that 
working-men should see whether 
or not management, as it now ex- 
ists, measures up to those princi- 
ples, and if it does not, they are 
certainly entitled to know the 
reason why. 

The principles of government 
which we fought successfully to 
establish are what we believe to 
be American ideals of government. 
Let us see what these are, and 



THE INDUSTRIAL REPUBLIC 9 

the historical development which 
caused them to be what they are- 
Back in the early part of the sev- 
enteenth century a small group of 
Pilgrims braved the dangers of the 
winter ocean, the dangers of an un- 
known land across the sea, to leave 
their homes and establish a new 
form of government where they 
would have more freedom and 
more voice in their affairs than 
they had at home. Others followed 
them and these groups formed col- 
onies along the Atlantic seaboard. 
For a century and a half they lived 
as colonies under the mother coun- 
try with comparative freedom. In 
the latter part of the eighteenth 
century, England tried to tax 
them without representation and 
these colonies then declared them- 
selves independent and avowed 
their intention of governing them- 



10 THE INDUSTRIAL REPUBLIC 

selves as an independent nation. 
They adopted a new type of gov- 
ernment, where representatives, 
who formed the governing bod- 
ies, were directly chosen by the 
people. 

Failure of this form of govern- 
ment was freely predicted every- 
where. For it was felt that only the 
few were capable of governing and 
that the majority could not be 
trusted with this function. 

The newly organized govern- 
ment, however, under the constitu- 
tion then enacted, has existed sub- 
stantially without change from 
that day to the present time. It has 
been the model from which all re- 
publican governments have been 
patterned, and the principles un- 
derlying this form of government 
have just won a glorious victory, 
establishing those principles as the 



THE INDUSTRIAL REPUBLIC 11 

foundation for the governments of 
the world for the future. 

Yet the republican form of gov- 
ernment has not been a panacea or 
"cure-all." It has not always met 
with success in other places. Suc- 
cessful government by the majority 
depends upon the character of its 
citizenship and the ability of the 
majority wisely to select represen- 
tatives to govern them. It requires 
a community of interest amongst 
the people, and the absence of 
sharply drawn class distinctions. 
Wherever the character of citizen- 
ship is low, or lacks intelligence, 
democracy has not been an entire 
success, and a form of government 
more or less autocratic has been 
necessary to maintain order and 
promote prosperity. The success of 
democracy, therefore, requires the 
fostering of education for the great- 



12 THE INDUSTRIAL REPUBLIC 

est number possible, in order that 
the government may be of the 
greatest good. 

The citizenship of our own coun- 
try has been such that under a re- 
publican form of government by 
the majority, we have grown to be 
the most influential power in the 
world, and stand as proof that 
what the world said could not be 
done, has been and is being done. 

Let us contrast for a moment the 
development of the German Gov- 
ernment during the past fifty years 
with that of our own. Prior to 1850, 
Germany was composed of several 
small states and frequently they 
had differences of opinion and wars 
with one another, each state so 
small that it frequently became 
prey to other nations. Lack of 
unity and common interests very 
seriously affected their peace and 



THE INDUSTRIAL REPUBLIC 13 

prosperity. But, face to face with a 
common danger, they united, and 
in 1870 succeeded in overwhelming 
the French Empire under Na- 
poleon III so decisively that they 
became a world power of the first 
rank. They were welded together 
in a strong autocratic government 
in the hands of a few very efficient 
men, who, with a keen realization 
of the nation's needs, were able, 
with the almost absolute power 
given them, quickly and quietly to 
do those things which were neces- 
sary to enhance the material pros- 
perity and power of the German 
nation. 

There is no question of the maxi- 
mum efficiency of autocratic gov- 
ernment when administered wisely 
and justly, and Germany's pros- 
perity so increased by leaps and 
bounds that the whole nation stood 



14 THE INDUSTRIAL REPUBLIC 

behind the autocratic forms which 
had produced such results. The 
same thing happened, however, as 
always happens under such a form 
of government. First came peace, 
then prosperity, then efficiency, 
then self-satisfaction, ambition, 
and greed. Reaching this last stage, 
the World War was the inevitable 
result, teaching mankind that no 
matter how efficient autocracy may 
be, the only safe form of govern- 
ment to rely upon in the future is 
government by the majority, work- 
ing to the end of making the ma- 
jority as efficient as possible. To 
prove that results have been the 
same in the past where autocracy 
ruled, we have but to go back in his- 
tory to the Roman Empire, to the 
French under Louis XIV, and un- 
der Napoleon, and to every other 
large nation in the past which has 



THE INDUSTRIAL REPUBLIC 15 

followed in the same footsteps. In 
all such cases the ruling party has 
seen the "handwriting on the wall " 
too late to let go gradually, a rev- 
olution results and destroys in a 
large measure the efficiency and 
prosperity previously built up. 



CHAPTER II 

THE LABOR-CAPITAL OPPOSITION 
— GENESIS AND GROWTH 

THERE is such a similarity be- 
tween the evolution of politi- 
cal government and industrial man- 
agement that it is instructive to go 
back to the origin of industry, trac- 
ing its development to the present 
stage. 

First, man existed on the bounty 
of nature, hunting and fishing, and 
by his labor alone acquired those 
things which were necessary to 
sustain life. With this method 
of living, each man required large 
areas of land to support him, and 
the world could, therefore, support 
a very small population. Man soon 
found, however, that he could cul- 
tivate the ground, produce food, 



THE INDUSTRIAL REPUBLIC 17 

and that he could raise animals also, 
instead of depending only on what 
nature produced unassisted. This 
enabled a much larger population 
to exist on the same area of land. 
It was next found that produc- 
tive capacity would be further in- 
creased by subdivision of labor, 
some men doing one thing and 
some another, and exchanging the 
products of their labor. As soon as 
the condition developed whereby 
a man was able to produce more 
than he was himself able to con- 
sume, he had the choice of ceasing 
to work as soon as his wants were 
supplied, or continuing to work 
and saving a portion of the product 
of his labor. The hunter saved some 
of the animals, fish, and fruit 
which he secured in the summer, 
dried and put them away for the 
winter. When he started to culti- 



18 THE INDUSTRIAL REPUBLIC 

vate the ground, he saved and 
stored away the surplus to tide him 
over until the next harvest. After 
he gathered the harvest, he indus- 
triously devoted his spare time to 
making tools with which he could 
produce crops in larger quantities 
with less labor. 

This gave rise to Capital which is 
always the result of and has its 
origin in the savings of labor. Some 
men did not save, but ceased to 
work beyond the point of barely 
taking care of their necessities. 
Others continued to work both for 
their physical and material benefit, 
and out of their savings created 
things necessary for sustenance, and 
tools and machinery with which to 
increase their productive capacity. 
These savings became what we now 
know as "capital/ 5 The use of this 
capital by labor resulted constantly 



THE INDUSTRIAL REPUBLIC 19 

in increased production at less ex- 
penditure of labor. The savings of 
this combined effort were again 
applied still further to increase pro- 
duction, enabling the earth's sur- 
face to support a constantly in- 
creasing population, until now it is 
so densely populated that destruc- 
tion of capital would result in 
world-wide starvation. Therefore, 
in industry to-day it is absolutely 
essential that capital and labor go 
hand in hand to produce the best 
results, in which they have a com- 
mon interest. 

In the old days when tribes ex- 
isted on the bounty of nature, as 
the population increased it was 
found necessary for one tribe to 
fight another to kill off the popula- 
tion in order that there might be 
enough food for the remainder. It 
was popularly considered that wars 



20 THE INDUSTRIAL REPUBLIC 

were an economic good, as other- 
wise the standard of living and sub- 
sistence would go down constantly 
as the population increased. The 
introduction of capital has de- 
stroyed this theory, and we now 
know that it is the use of capital, 
combined with labor, that is the 
key to the solution of an increase 
both in the population and in the 
higher standards of living. 

Capital, be it reiterated, is noth- 
ing but the savings of labor, and 
its logical function is to be put 
at the disposal of mankind to be 
combined with labor to make that 
labor more productive. In other 
words, capital should be put at the 
disposal of those who labor, for the 
benefit of the community, and the 
owners of that capital should be 
entitled to a fair reward for its use. 
It is evident that this is something 



THE INDUSTRIAL REPUBLIC 21 

entirely different from the view 
that humanity should loan its labor 
to the man who owns capital for 
the benefit of capital, and it is the 
difference between these two ideas 
that is to a large extent at the 
bottom of the industrial unrest of 
to-day. 

To return to the progress of in- 
dustry: As we pass from the agri- 
cultural stage to the manufactur- 
ing stage, it becomes advisable to 
divide laborers into groups, part to 
do the farming, part to manufac- 
ture the tools and machines neces- 
sary to increase production, and 
part for special services, such as 
doctors, ministers, lawyers, etc., 
render. This started the so-called 
"crafts 55 where different groups of 
men specialized in their particular 
craft or trade, and by study and 
practice became very efficient in 



22" THE INDUSTRIAL REPUBLIC 

these lines, making the tools neces- 
sary and exchanging these tools for 
the products of the labor of others. 
These men combined their own 
capital with their own labor and 
disposed of the product to the best 
advantage to themselves. 

In this evolution some men saved 
a great deal more than others. Tools 
became more highly specialized 
and more costly in time and labor, 
and only those who had saved con- 
siderable were able to own these 
tools. The men who had these tools 
were able to produce cheaper than 
those who had not, which caused 
the latter to find their business un- 
profitable, as they could not get 
sufficient returns in competition to 
give them an adequate return for 
their labor. These men in the 
meantime, however, had become so 
skilled in their crafts that they 



THE INDUSTRIAL REPUBLIC 23 

could combine their labor with the 
capital of others and still make more 
than they could by engaging in 
some other occupation which did 
not require capital. 

From this grew the wage system 
whereby a man sold his labor for 
a fixed amount as being the most 
convenient and easy way of getting 
his share of the combined effort. 
The lack of control of capital on his 
part placed him at a disadvantage, 
and in order to protect himself and 
get a fair share of the product of 
his labor, he combined with others 
in a similar position, and this has 
resulted in the formation of trade 
unions for the mutual benefit of 
those who work for wages. The 
result of this was that he built 
up a community of interest with 
others of his class, and by force of 
numbers was able to get better 



24 THE INDUSTRIAL REPUBLIC 

wages and better working condi- 
tions than would otherwise have 
been the case. A natural reaction 
was the creation of a community of 
interest among owners of capital, 
and they in turn joined to protect 
their capital or savings, to see that 
it also had a fair return from the 
combined efforts of capital and la- 
bor. This resulted in the opposition 
of the two classes, Labor and Capi- 
tal, each more or less sharply de- 
fined, each dependent upon the 
other, and each trying to see that 
it got its fair share of the results 
of the combined effort. For several 
centuries past the proportion of 
wage-earners who combine their 
labor with other people's capital, 
has been constantly increasing over 
the people who combine both capi- 
tal and labor in their own super- 
vision, such as the farmers, pro- 



THE INDUSTRIAL REPUBLIC 25 

fessional men, and others, until at 
the present time an extremely large 
proportion of laborers are wage- 
earners with little if any capital at 
their own command. 

In the beginning the division of 
the product of industry between 
those who furnished the capital and 
those who furnished the labor was 
relatively a simple matter, as the 
groups working together were very 
small. The men who furnished the 
capital were working with the 
others, and understood the wants 
and needs of labor, and were in 
a position to measure accurately 
the service rendered by those who 
furnished the labor. But in order 
to increase production and lower 
costs, labor became further and 
further subdivided and industries 
changed from small units to very 
large units, concentrated in centers 



26 THE INDUSTRIAL REPUBLIC 

of population and in convenient 
locations with reference to power, 
the gathering of raw materials, and 
distribution of finished product. 
Industries of this nature so much 
better served the community that 
others were soon at a disadvantage 
and went out of business. 

The efficiency of this so-called 
"mass production" or "big busi- 
ness" organization of industry pro- 
duced so much greater results that 
those whose capital was invested in 
this form of organization received 
very large returns, and the owners 
of this capital, having much more 
than sufficient to support them- 
selves, either for the present or fu- 
ture, found that work of any na- 
ture for them became unnecessary 
and many of them simply contin- 
ued to loan their capital and live 
upon the returns from this; that 



THE INDUSTRIAL REPUBLIC 27 

is, instead of running the business 
themselves, they hired other men 
to manage the business for them. 

These men were hired to, per- 
form labor which had formerly 
been done by the capitalist, this 
being to look after and increase the 
share which capital should have in 
the reward. In other words, they 
were laborers hired to manage 
other laborers, but not with the 
same community of interest with 
the other laborers, and their re- 
ward was to be measured by the 
amount that they could increase 
the capital which they were hired 
to manage. In consequence, lack of 
interest in the collective result of 
the industry outside of the wage 
received (which seemed to bear no 
particular relation to the success of 
the industry as a whole) soon seized 
upon the rank and file of industrial 



28 THE INDUSTRIAL REPUBLIC 

employees. No longer having any 
acquaintance with the men who 
labored in industry soon caused a 
lack of interest on the part of those 
who supplied the capital. The em- 
ployees, feeling their wage reason- 
ably assured, started to spend all 
of their wages for current needs 
and did not save for the future. 

Such has been the genesis and 
development of the labor-capital 
opposition. The result of this evo- 
lution has been to create a class of 
capitalists who do not work, and a 
class of laboring men who do not 
save and who have no capital. It 
must be perfectly evident to any 
one that there can be no commu- 
nity of interest whatsoever between 
these two classes, and the division 
of a population into two classes of 
this nature results in endless fric- 
tion and continual collective bar- 



THE INDUSTRIAL REPUBLIC 29 

gaining, neither side being satisfied 
with the ever- varying results. 

Thence follow strikes, lockouts, 
and loss of product, as the capital- 
ist who does not work always de- 
sires to have as much reward as the 
capitalist who does work, and the 
laboring-man who saves nothing 
always desires to live as well and be 
as well taken care of in the future 
as the man who saves a part of the 
results of his labor for a rainy day. 
Neither of these desires is right, 
and both aim at special privileges 
which can only be granted by in- 
justice to others. As there never 
can be any common ground be- 
tween the capitalist who does not 
work and the laborer who does 
not save, the power of either one 
of these groups to obtain for itself 
special privileges, to which it has 
no right, should be curbed. 



SO THE INDUSTRIAL REPUBLIC 

The tendency of combinations of 
capital and combinations of labor 
to build up large, powerful bodies, 
each one for its own interest, is, 
therefore, undemocratic and un- 
American, and in the interests of 
all there should be substituted for 
this something which would in- 
crease the incentive for labor to 
save more, which in turn would 
cause it to produce more. We 
should also endeavor to see that 
the owner of capital who does not 
labor should be restricted in his 
ability to acquire more than the 
current market rate for the use of 
his capital, and remove from such 
capital any possibility of being used 
on the principle of "Might makes 
Right." 

Increased production and the 
ability of the earth to support an 
increasing population depend en- 



THE INDUSTRIAL REPUBLIC 31 

tirely upon both labor and capital 
working together. Economically, 
therefore, they have a common 
interest, and they should be so or- 
ganized that this common interest 
will be so apparent to both that 
they will work together in har- 
mony. 



CHAPTER III 

PRESENT STATUS OF THE LABOR- 
CAPITAL OPPOSITION 

EXAMINING the typical form 
of large industrial organiza- 
tions of to-day, we find a very large 
plant investment, often running 
into many millions of dollars in 
value, for purposes of production 
and distribution. The capital which 
this represents has been furnished, 
often, by thousands of different 
people who have presumably placed 
their savings in this particular en- 
terprise because they thought their 
savings would bring a higher re- 
turn when invested here than else- 
where. 

Such investors may be divided 
into three classes; first, those who 
have invested in the form of a 



THE INDUSTRIAL REPUBLIC 33 

straight loan to the business, tak- 
ing a mortgage on the plant as 
security. The reward for the use of 
this capital is usually a small inter- 
est rate which is paid out of the 
profits of the business, and if there 
are no profits these investors have 
asked that the plant be sold and 
that they be paid out of the sale 
of the plant, which necessitates the 
discontinuance of the business. In 
this, capital takes very little risk. 
Such investors are usually known 
as "bondholders." 

Second, there are those who lend 
their capital to the business, taking 
all of their return out of the profits 
of the business, and who insist that 
their claims have preference before 
lending their capital, and with this 
preference are satisfied to take a 
fixed return out of the profits, al- 
lowing those who do not have this 



34 THE INDUSTRIAL REPUBLIC 

preference to take the balance. 
These are known as "preferred 
stockholders." 

Third, there are those who loan 
their capital to the business, agree- 
ing to take as their share only what 
is left after the wages and all bills 
are paid, and the bondholders and 
preferred stockholders taken care 
of. These are usually known as 
"common stockholders/' and as 
they take the largest amount of 
risk, they usually are in control of 
the operation of the industry and 
are the most vitally interested in 
its success. 

The men who supply the labor 
furnish their services at a fixed rate 
and receive their return either in 
the form of wages or salary. They 
are usually paid at so much per 
piece for the articles produced, or 
so much for the time which they 



THE INDUSTRIAL REPUBLIC 35 

work, which amount is also based 
upon the amount which they are 
expected to produce within a given 
time. Here we run across the mis- 
taken idea that a man's time is 
worth so much money, regardless 
of what he produces. The incon- 
jistency of such an argument is 
3sily demonstrated in the fact 
that the industry can sell only the 
products of labor and not the time 
used in that production. Therefore, 
there is no sound economic reason 
for paying for time, and wages 
must be based entirely upon the 
amount produced. The fact that it 
is expressed in units of time is inci- 
dental and not fundamental. Time 
is for use : it is not for sale. 

Now we envisage all who supply 
either capital or labor and witness 
them united and working together 
in production. The products are 



36 THE INDUSTRIAL REPUBLIC 

distributed and the reward comes 
in. If the industry is going to con- 
tinue, a certain amount of the 
reward has to be used to replace 
the raw materials and equipment 
which were used in making the fin- 
ished product, and the balance is 
either to be invested in an expan- 
sion of the business or divided as 
nearly as possible between the cap- 
ital and labor used in production 
in direct proportion to the service 
rendered. 

Theoretically there should be no 
sum expended for labor or for in- 
terest or dividends until the prod- 
ucts of industry have been sold 
and money received in exchange. 
But this is obviously impossible in 
modern industry, since it is often 
months or years before some of the 
capital invested is sold as finished 
product, and often many months 



THE INDUSTRIAL REPUBLIC 37 

before the article in which labor 
is expended is sold or exchanged. 
Owing to the large number of men 
who have not saved sufficiently to 
exist in the meantime, an estimate 
has to be made in advance upon 
what the results of the business are 
going to be so that these may get 
an advance return. It is impossible 
to make the wage a full payment 
to labor and at the same time a 
fair payment, but as a matter of 
practice we have come to do this 
very thing by making the wage 
payment the full return for labor's 
share in industry. 

What is the result? The laboring- 
man says either he can't or he 
won't take any financial risk on the 
successful and profitable operation 
of the industry, but he will take his 
wage as his full return for his share 
in the partnership. It follows that 



38 THE INDUSTRIAL REPUBLIC 

those who supply the common cap- 
ital of the industry assume, either 
from choice or from necessity, all 
the risk, and will quite naturally 
claim everything produced in ex- 
cess of the fixed obligation to labor 
in the form of wages, and the fixed 
returns to other capital which is 
safeguarded against real risk. 

So long as labor takes this stand, 
the owners of common capital are 
entirely justified in their position, 
and the share which labor has 
received in the past, based upon 
its acceptance of the "wage in 
full/ 5 has been its fair reward. If 
labor were to take the same atti- 
tude in the future, those who sup- 
ply common capital are entitled 
to continue to receive the same 
proportion of the reward of indus- 
try that they have received in the 
past, up to a certain point. 



THE INDUSTRIAL REPUBLIC 39 

All know that capital has been so 
well rewarded in many instances 
by this arrangement that those who 
provide the common capital, real- 
izing the power which this gives 
them, are often apt to say to labor 
that whether labor wishes to take 
a risk with them or not, they don't 
wish labor to have the opportunity 
of doing so. This attitude is en- 
tirely wrong. Labor may not have 
any capital to risk, but it is risking 
all it has to risk, that is, its labor, 
and its ability to get the best re- 
sults from this labor is bound up 
to a large extent with the perma- 
nency and profitableness of the 
business. Labor may not risk a pro- 
portionately large amount based 
upon the productiveness of what 
it lends, but it does risk a very 
large amount in proportion to what 
it has to lend. It is, therefore, 



40 THE INDUSTRIAL REPUBLIC 

only a matter of mere justice that 
if labor has received the current 
wage and capital at the end has re- 
ceived the current rate of interest, 
any surplus beyond this must nec- 
essarily have been created by the 
combined use of capital and labor, 
and should be divided between the 
two in some proportion and not go 
entirely to capital alone. 

With this incentive the increase 
in quantity and efficiency of pro- 
duction will provide means for cap- 
ital to share a percentage of earn- 
ings with labor without net loss 
to itself. 

From all sides to-day we hear 
the economic axiom that the only 
way to keep wages at their present 
high level, or increase them in the 
future, is to become more efficient, 
and by so doing to increase pro- 
duction. 



THE INDUSTRIAL REPUBLIC 41 

When profit-sharing or joint- 
stock ownership with labor be- 
comes a more established custom, 
companies which do not offer such 
opportunities will not only find it 
difficult to obtain new men of the 
right type, but will not be able to 
retain those whom they now have. 
The advantage and good-will ac- 
crue to those who first adopt it. 

Assuming the condition to pre- 
vail universally that labor should 
receive its full payment in wages, 
and capital take all the excess, the 
natural consequence would be to 
divide industry into two classes, 
one whose interest is entirely in 
wages, and the other entirely in 
profits. The first class must realize 
that so long as the business is suc- 
cessful enough to obtain the capital 
necessary to continue its operation, 
any further profits are detrimental 



42 THE INDUSTRIAL REPUBLIC 

to the interests of labor and, there- 
fore, they should strive to have 
their wage so high that excess 
profits will not be possible. On the 
other hand, those supplying the 
capital would realize that so long 
as sufficient labor can be obtained 
to operate the business, the wage 
must be kept as low as possible 
in order that the profits may be 
larger. This is the condition which 
generally prevails in industry to- 
day, and by having a difference of 
interests rather than a community 
of interests between the two par- 
ties, conditions promoting friction 
and unrest are always present. 
This condition can be overcome 
only by bringing about a commu- 
nity of interests. 

One of the reasons labor hereto- 
fore has not wished to take a risk 
in the business in relation to its 



THE INDUSTRIAL REPUBLIC 43 

reward has been the feeling on the 
part of labor that it has no voice in 
the management of the business. 
It is not in position to affect the 
profits. Therefore, it should not be 
called upon to take a speculative 
interest in the business, but should 
make those in control take all the 
risk. To very many workers this 
is a very satisfactory arrangement, 
but there are always some who 
have saved a little, who would be 
ready, if they had the opportunity, 
to risk their savings with the other 
capital, and there are others who 
think that risking their labor alone, 
when they have no capital, is suffi- 
cient to justify their having "a 
say" in the selection of represen- 
tatives to administer the enter- 
prise. There is certainly justice in 
this contention which cannot be 
brushed aside. It must be recog- 



44 THE INDUSTRIAL REPUBLIC 

nized and fair representation given. 
While it is difficult to determine 
exactly what fair representation 
should be, we must attempt to pro- 
vide for it as far as possible and not 
dismiss the idea as being imprac- 
tical. The manifest injustice of 
no representation must be discon- 
tinued. 



CHAPTER IV 

CLUES TO THE SOLUTION 

TO recognize the opposition of 
labor to capital in the present 
organization of industry and to 
remedy it requires a progressive 
change in industrial organization 
which can be undertaken in our 
country with greater safety than 
in almost any other. 

Our problem in industry to-day 
is very similar to that which con- 
fronted our forefathers in 1776 and 
1783. At that time we found our 
people being taxed without repre- 
sentation by a foreign government, 
and the distribution of part of 
the product of their labor being 
made by others many miles away 
with whom they had no common 
interest. 



46 THE INDUSTRIAL REPUBLIC 

To-day we find large numbers of 
working-men having their wages 
fixed by people who, while they 
have some interests in common, 
have a great many interests op- 
posed. We also find that often the 
share of reward between those who 
labor and those who supply the 
capital is not fairly divided. It was 
the task of our forefathers to see 
that all parties having an interest 
at stake were represented in the 
Government, and that the privi- 
leges and rewards created were 
evenly distributed. They realized 
that justly to make an even distri- 
bution of privileges each must do 
his share to produce the privileges. 
In other words, for every privilege 
there is a corresponding duty. 

A group of representative men 
were selected from among the peo- 
ple to form a constitution which 



THE INDUSTRIAL REPUBLIC 47 

should be the fundamental law by 
which the inhabitants of the coun- 
try should be ruled. How they met 
this problem is shown by our Fed- 
eral Constitution, and the wisdom 
of their work is evidenced by the 
long period of years under which the 
people have been governed by this 
document, the large number of peo- 
ple now governed by it, and also 
the model which it has been for 
other lawgivers. 

An analysis of the underlying 
principle of the Federal Constitu- 
tion affords us the surest guide 
which we have for solving the pres- 
ent industrial problem. This prin- 
ciple is that it is a government by 
the people, based upon the equal- 
ity of individuals, and that human 
rights stand first and ail other 
rights secondary, whether they be 
from birth, education, wealth, or 



48 THE INDUSTRIAL REPUBLIC 

from other sources, at the same 
time recognizing property rights. 

By enforcing the duty of paying 
taxes sufficient security is given to 
enable the people to get such addi- 
tional capital as they may require 
at even better than the current 
rate of interest, and at the same 
time give it no voice in the Govern- 
ment as capital. Without the power 
of taxation or compulsory savings, 
capital could not be obtained with- 
out additional security of some sort, 
and it would have to have direct 
representation in the Government. 
It is the desire of the workers that 
this same condition should exist 
in industry. To obtain this condi- 
tion by honest methods, sufficient 
security must be given to capital 
required in the industry to secure it 
at the current rate of interest, with- 
out necessarily giving it a voice in 



THE INDUSTRIAL REPUBLIC 49 

the management to insure its safety. 
The only possible way to do this 
and still have the workers in con- 
trol of the industry the same as 
they are in control of the Govern- 
ment, and with the same kind of 
equality of representation, would 
be for the workers to save and 
jointly pledge their savings to the 
development of the business so 
that other capital which they re- 
quire shall be satisfactorily safe- 
guarded to such an extent that a 
sufficient number of people will 
loan the required capital to the 
industry without requiring any 
representation. Until the workers 
are able and willing to do this, or 
can be compelled by a majority of 
their own people to do so, it is quite 
obvious that capital must have 
representation. If labor does not 
wish to assume any risk at all, or is 



50 THE INDUSTRIAL REPUBLIC 

not able to do so, then capital must 
be in control of the management, 
which position it now occupies. 

Capital should not assume, how- 
ever, because the majority of work- 
ers cannot or do not wish to invest 
their savings in the enterprise, that 
none of them should be permitted 
to do so. It should encourage and 
offer facilities for those who labor 
and save to become interested in 
the operation of the business and 
distribution of the profits. It can- 
not be expected that capital, which 
is already invested in a business, 
should relinquish control of that 
business until it is safeguarded for 
the future, as it has not the ability 
to detach itself from the enterprise 
once it finds itself in an unsatis- 
factory position, the same as the 
man who labors can detach himself 
from the enterprise at will. 



CHAPTER V 

RIGHTS INVOLVE DUTIES 

THERE is one fundamental eco- 
nomic theory of which in the 
past capital has either been igno- 
rant or has totally ignored. This 
is the relation of human rights to 
property rights. Capital must come 
to realize that human rights are 
first and property rights second. 
The law recognizes this to the ex- 
tent of making wages the first lien 
on an industry before interest and 
capital are recognized. It is also 
recognized that after labor has re- 
ceived the current market wage, 
and this has preference, it should 
be entitled to no further rights until 
capital has received the current 
rate of interest for its use. 

The desires of the working-men 



52 THE INDUSTRIAL REPUBLIC 

have been limited very largely to 
four points; (1) higher wages, (2) 
shorter hours, (3) representation in 
the management, and (4) share in 
the profits. 

The latter two can be justly rec- 
ognized only when the workers are 
prepared to take the responsibili- 
ties and duties of safeguarding the 
rights of capital invested in the 
industry, the same as they do as 
citizens in protecting the Govern- 
ment by paying taxes. If the 
framers of the Federal Constitu- 
tion correctly solved the problem 
of government politically, then we 
are right in the belief that the prob- 
lem of industrial management is 
analogous to that which they faced, 
save that as applied to industry we 
must determine the logical steps 
to pursue in changing the present 
industrial management over to the 



THE INDUSTRIAL REPUBLIC 53 

federal form, with just regard for 
the rights of both capital and labor. 
The first step is to establish 
an industrial citizenship, creating 
equality of powers of the individual 
citizens to choose representatives 
to run the business. There must, 
of necessity for good business, be 
certain restrictions upon indus- 
trial citizenship. These restrictions 
should only be placed upon the 
age and intelligence of the indi- 
vidual to insure a majority which 
would be able to safeguard the best 
interests of all. These limitations 
should exist only so long as the in- 
dividual did not qualify, and every 
opportunity should be given him to 
be able to qualify as soon as possi- 
ble, so that all might have the op- 
portunity of citizenship if they are 
ready to assume its duties. These 
citizens would have the power to 



54 THE INDUSTRIAL REPUBLIC 

elect representatives who should 
govern the policy of the business to 
the extent of safeguarding their 
human rights. Only as they provide 
their own underlying capital for the 
business may they gain control to 
the extent of being able to limit the 
capitalist's rights. This would mean 
joint control by representation of 
both labor and capital until such 
time as this point had been reached. 
Until that time representative con- 
trol by the workers should only be 
to the extent of protecting their 
human rights while the control of 
property rights should remain with 
those who furnish the property. 

In order to conform to the ideal 
of management which we have in 
our National Government, it would 
be necessary either that a certain 
portion of the wages paid be auto- 
matically reinvested in the business 



THE INDUSTRIAL REPUBLIC 55 

in a way similar to that with which 
we raise taxes, or else that the ex- 
cess profits of the company, after 
.wages and current interest rates 
on capital have been paid, should 
be divided and the share of labor 
be reinvested in the company at 
the same value as the capital al- 
ready similarly invested. So long as 
labor is in position where it has to 
take its share in form of wages, 
which are anticipated profits, or as 
long as labor is unable to have sav- 
ings to make good any losses which 
capital may sustain in the operation 
of the business, just so long should 
the control of that capital remain 
with the owners of it. Any other 
solution would be confiscation and 
injustice. 



CHAPTER VI 

THE INDUSTRIAL REPUBLIC 

BEFORE attempting an ad- 
vance in this direction it would 
obviously be necessary to sever all 
connections with other organiza- 
tions whose functions might inter- 
fere or conflict with those of the 
governing body elected by the 
workmen and management. Only 
by clearing our decks for action in 
such manner can we build up the 
confidence between labor and man- 
agement which is necessary for co- 
operation and harmony. 

If we are to form an industrial 
republic it is logical that we should 
study the organization and work- 
ings of the political republic, and 
the United States Government af- 
fords this opportunity. In defin- 



THE INDUSTRIAL REPUBLIC 57 

ing a plan of organization along 
these lines, the first step is the de- 
termination of the limitations of 
.citizenship. There must be (1) a 
certain age limit within which it is 
presumed a man should ordinarily 
have acquired sufficient intelli- 
gence to be expected to use good 
judgment; (2) knowledge of a com- 
mon language; and (3) a sufficient 
time in the industry to become fa- 
miliar with its needs. These citi- 
zens should then elect representa- 
tives to form a management to 
insure their human rights, such as 
fair market wage, fair working 
conditions, and other matters per- 
taining to the safety and welfare of 
the people engaged in the indus- 
try. In order to protect the indus- 
try against radicalism, and taking 
steps hastily which might after- 
wards have to be corrected, we 



58 THE INDUSTRIAL REPUBLIC 

could well adopt the plan of our 
forefathers and establish two bod- 
ies and make it necessary for legis- 
lation to pass a majority of each of 
these bodies and also the executive 
body. 

Persons eligible to serve as rep- 
resentatives would need still fur- 
ther qualifications as regards age 
and length of service than would be 
requisite for mere citizenship. This 
was found very necessary for the 
safety of our political republic in 
its early days and is doubly neces- 
sary for an industrial republic, for 
the following reason : 

A government, by having the 
power to fix laws for immigration 
and tariffs or embargoes on impor- 
tation of materials, can artificially 
control the supply of labor and cap- 
ital of the nation, to prevent an 
inrush of either one upsetting the 



THE INDUSTRIAL REPUBLIC 59 

balance, in case it makes mistakes 
in legislation. In other words, it 
can stave off the disastrous results 
of unwise legislation and correct 
its mistakes. With industry, on the 
other hand, unless it is protected 
by patent monopoly granted by 
the Government, its mistakes can 
almost instantaneously be taken 
advantage of by its competitors 
with very little prospect of recov- 
ery of the lost ground. In other 
words, a non-monopolistic indus- 
try is in a similar position to a na- 
tion always at war. We have al- 
ways found that the Executive 
Branch of the Government must 
be entrusted with greater powers 
in the face of common danger than 
are necessary to grant to it in time 
of peace. It is for this reason that 
capital is unprotected and must 
have sufficient power to protect 



60 THE INDUSTRIAL REPUBLIC 

itself against business competition, 
either by inherent right or by con- 
sent of the majority of its indus- 
trial citizens. So long as it is in this 
position, it must have the power to 
overrule the opinion of the popular 
majority on such points as do not 
interfere with the human rights of 
those engaged in the business, to 
the end that its principal and fair 
interest rate be safeguarded. 

We may, therefore, assume that 
the majority of industrial citizens 
should select a House of Represen- 
tatives with certain qualifications 
for membership, and a Senate with 
still higher qualifications for mem- 
bership, and that until such time 
as the rights of capital can be prop- 
erly safeguarded, the Executives 
should be the representatives of 
capital, with veto power over such 
legislation as might be unfair to 



THE INDUSTRIAL REPUBLIC 61 

the rights of capital, while provi- 
sion should be made for overruling 
the veto of Executives in such mat- 
ters as might be distinctly human 
rights, which take precedence. It 
should be in the power of the ma- 
jority of all industrial citizens to 
insist that all who wish to remain 
citizens and participate in repre- 
sentation and the rewards of in- 
dustry, should make such contri- 
bution from their wages or salaries 
to the industry as might seem 
necessary or advisable properly to 
safeguard the rights of capital, to 
the further end of their regaining 
that degree of financial participa- 
tion which they lost through past 
acceptance of advance returns in 
the shape of wages. 

In the national form of govern- 
ment, the citizens make the laws 
and the taxpayers furnish the cap- 



62 THE INDUSTRIAL REPUBLIC 

ital. In government citizens and 
taxpayers are one and the same. In 
industry, under this form, the in- 
dustrial citizens would be making 
the laws and the common stock- 
holders would pay the taxes, so 
that both would have to be repre- 
sented. The only way to make 
both bodies the same would be to 
pay off all of those who furnish 
capital, who are not members of 
the organization, and insist that 
all common stock, once owned by 
members of the organization could 
be sold only to other members of 
the organization. In this way the 
same condition would exist as in 
our Federal Government. It is 
true that each individual would 
not hold the same amount of stock, 
any more than each citizen pays 
the same amount of taxes. An 
identical condition exists, however, 



THE INDUSTRIAL REPUBLIC 63 

in both management and govern- 
ment: that the best results will be 
obtained as incentive and oppor- 
tunity are given to acquire prop- 
erty; and while taxes are paid 
somewhat in proportion to one's 
ability to pay, they must never be 
assessed in such a way as to dis- 
courage any one from producing 
or to stop the desire to save. 

Having organized industry on 
this basis, its success would largely 
be measured by the character of the 
citizenship as regards its intelli- 
gence in electing representatives to 
manage wisely, its individual de- 
sire to save and contribute both its 
energy and savings to the business, 
and its realization of its duty to- 
wards the organization, as well as 
of its expectation of share in the 
privileges. 



CHAPTER VII 

INDUSTRIAL CITIZENSHIP 

IN every industry there are three 
parties to its success: (1) the 
labor, (2) the capital necessary to 
engage in production, and (3) the 
customer to take the product. 

In seeking the customers we find 
many different kinds of people to 
whom to sell. Some are very rea- 
sonable and only want a square 
deal, getting as much as they are 
entitled to, based upon cost of pro- 
duction plus a fair profit. The only 
measure they have of this, as far 
as their particular interest is con- 
cerned, is that the efficiency of 
the manufacturing organization be 
such that they get as good value as 
they could get by dealing with a 
competitor. This should be suffi- 



THE INDUSTRIAL REPUBLIC 65 

cient to obtain the good-will of a 
reasonable customer, and anything 
which he gets in addition to this 
should increase the amount of 
good-will and fortify the industry 
against possible temporary mis- 
takes in the future. This class 
of customers should be earnestly 
sought after and obtained. 

On the other hand, there are 
many other prospective customers 
who are not satisfied unless they 
get very much better product than 
they can get anywhere else, and 
they would even see the labor and 
capital employed insufficiently re- 
warded in order that they might 
get a better product at a lower 
price than they could get it else- 
where. This class of customers 
should be avoided in fairness to the 
other customers and to all the in- 
terests concerned. 



66 THE INDUSTRIAL REPUBLIC 

Next we consider those who fur- 
nish capital. Many people having 
the capital to lend are satisfied with 
the current interest rate for the use 
of their capital, based upon the 
risk taken, this being sufficient to 
obtain their good-will, while any 
amount in addition to this creates 
increased good-will and gives them 
a desire to supply the capital to 
tide the industry over any tempo- 
rary difficulties into which it may 
run. Every effort should be made 
to obtain capital from men such as 
these. But we find others who have 
capital to lend who are only satis- 
fied when they obtain the highest 
possible return for their capital, 
regardless of the rights of the cus- 
tomer to obtain honest product, 
and regardless of the rights of the 
workers to obtain an honest return 
for their labor. Such owners of 



THE INDUSTRIAL REPUBLIC 67 

capital are undesirable, and every 
effort should be made to replace 
them with men of the other class. 

With reference to the labor 
which operates the industry, we 
find many who are satisfied with a 
fair return for their labor and quite 
ready to concede to capital a fair 
return and to the customer a fair 
product, as long as they receive 
the current market rate for their 
services. They also have sufficient 
good-will toward the company to 
produce as much as they can with- 
out detriment to health, and their 
good-will is increased by sharing in 
any further reward after the other 
two partners have been taken care 
of. Every possible effort should 
be made to obtain the good-will of 
this class of labor. 

On the other hand, we find many 
laborers who selfishly believe that 



68 THE INDUSTRIAL REPUBLIC 

their effort is the only contributing 
factor to the success of the busi- 
ness, and think of nothing but get- 
ting the highest return for their 
labor regardless of their ability or 
the amount they produce, and re- 
gardless also of the rights of capi- 
tal and the customer. Oftentimes, 
they figure that their time alone is 
worth their reward, regardless of 
what they produce, and use no ef- 
fort to do an honest day's work. 

As in the case of undesirable 
customers and capitalists, this type 
of labor should be antagonized and 
turned away whenever possible in 
all fairness to the others. No in- 
ducement should be made to re- 
tain them in industry, and defin- 
ite encouragement should be given 
them to leave and seek employment 
elsewhere. 

The undesirable partner, whe- 



THE INDUSTRIAL REPUBLIC 69 

ther he be customer, capitalist, 
or working-man, whose only rea- 
son for being a partner is his su- 
preme selfish interest, can be sat- 
isfied only by unfair sacrifice on 
the part of the other partners. 
Therefore, his good-will should not 
be sought, and any effort spent 
upon him should be by way of in- 
ducing him to take a different view 
of things. When such men can be 
eliminated from industrial organi- 
zation, those who remain will have 
a community of interest based on 
justice and fairness, and the good- 
will of each should be sought after 
by the other two. 

It is, therefore, desirable that the 
policy of up-to-date industrial or- 
ganization be such as to gather to- 
gether a citizenship of the right 
type, offering to all who happen 
to be engaged in the industry, 



70 THE INDUSTRIAL REPUBLIC 

every opportunity by means of 
education, example, and friend- 
ship, to become a citizen of right 
type, and if these influences fail, to 
eliminate the undesirable partner 
from the industry. An industrial 
citizenship of this nature will break 
down the present diversified inter- 
ests which are always a source of 
friction and cause for unrest, and 
by equality of opportunity create 
an organization composed of men 
the great majority of whom will 
have a common interest. The mi- 
nority will always have the oppor- 
tunity of qualifying to join with 
them, and if they do not do so, will 
at least be powerless materially to 
interfere with the success of the 
organization as a whole. 

It is, of course, true that there 
will always be an undesirable mi- 
nority of employees in any indus- 



THE INDUSTRIAL REPUBLIC 71 

try, the same as there are undesir- 
able inhabitants in any country. 
These perform an economic func- 
tion, as industry cannot always 
employ the same number of peo- 
ple, and must give opportunities of 
advancement from time to time. 
As advancement is a relative term, 
there must be some who do not 
move up, and these naturally be- 
long to the class which does not 
wish to be fair and productive. As 
the needs of industry for labor 
vary, steady employment to those 
trying to do their best can be pro- 
vided only by laying off those who 
have not earned steady employ- 
ment. It should not be the duty of 
any particular industry to provide 
steady employment or advance- 
ment for these latter, but there is 
always a distinct duty that the in- 
dustry do everything possible to 



72 THE INDUSTRIAL REPUBLIC 

educate and assist such workers to 
change their ways and produce and 
save, becoming good citizens of the 
industrial republic. 

The world does not owe every 
man a living, but it does owe every 
man the opportunity to earn a liv- 
ing, and each industry as a duty 
should do its share in affording men 
the opportunity to earn that living 
up to its ability to do so. 

Having adopted a policy of care- 
ful selection of its working force, 
management can then grant to 
those who qualify by age, length 
of employment, and, possibly, un- 
derstanding a common language, 
the rights of industrial citizenship 
on the basis of equality for the 
purpose of selecting representatives 
by a direct vote with power to 
legislate on all matters, to insure 
justice to the working-men as a 



THE INDUSTRIAL REPUBLIC 73 

whole, and to represent them in 
dealing with the other partners, 
capital and management, for the 
mutual advantage of all. Such an 
industrial republic would provide 
for a legislature composed of two 
houses, elected by the working 
force of the industry, the qualifica- 
tions of the upper house being such 
as to make this house the more con- 
servative of the two by restricting 
membership to men of somewhat 
mature age and longer period of 
service with the industry. This is 
especially necessary where there is 
a large labor turnover, where the 
qualifications for industrial citizen- 
ship are inadequate properly to safe- 
guard the industry, although such 
precautions would automatically 
become more unnecessary when 
an industry became stable, with a 
relatively constant working force. 



74 THE INDUSTRIAL REPUBLIC 

This industrial legislature would 
have the power to legislate on 
all matters affecting justice to 
the working force, while measures 
passed by a majority vote of both 
houses would go to the chief execu- 
tive of the branch of the industry, 
which the legislature represents, 
or the industry as a whole, in case 
it covers this extent, for approval* 
or veto, the same as is done in our 
Government by the Governor of a 
State or by the President. In case 
of veto, a measure would go back 
to the houses, and if passed by 
a two-thirds vote of both houses, 
such action would be final, unless 
it should be a matter unfairly af- 
fecting the interests of those who 
furnished the money, or the custom- 
ers who buy the product, which 
would be distinctly unfair to them, 
in which case it would go before 



THE INDUSTRIAL REPUBLIC 75 

the board of directors of the com- 
pany for decision. 

If all capital used by the com- 
pany is properly safeguarded as 
to principal and interest by the 
savings of the working force, and 
through ability to tax the working 
force, as in the case of our National 
and State Governments, the pass- 
ing by a two-thirds vote over the 
veto would be final without refer- 
ence to any other body. This would 
be the condition of an ideal indus- 
trial republic. This condition can 
justly be reached only when the 
working force as a whole has the 
ability and intent to risk its own 
capital as a proper safeguard for 
outside capital which it uses in its 
business. 

Such a state of industrial organ- 
ization is a highly desirable one as 
being in line with our American 



76 THE INDUSTRIAL REPUBLIC 

ideals of government. In such an 
organization all capital, except that 
furnished by the laboring force, 
would be put at the disposal of the 
laboring force for the purpose of 
production and the general benefit 
of the community, and yet due con- 
sideration of the rights of capital 
would be given. Any attempt of the 
working-man to appropriate the 
capital of others for his own use, 
without proper safeguard and with- 
out paying a fair return for its use, 
would only result in disaster. This 
capital would soon be used up, and 
it would be impossible for the in- 
dustry to obtain any more. 

On the other hand, any attempt 
of those who furnish capital to in- 
sist upon holding control of the 
industry, without affording the 
opportunity for those who labor 
to apply their savings and pledge 



THE INDUSTRIAL REPUBLIC 77 

their capital to the support of the 
industry, or to prevent the laborer 
from being represented in the man- 
agement of the business to the ex- 
tent to which his interests are at 
stake and in which he has taken a 
risk, will result in a discontented 
labor force, based upon a feeling of 
injustice, which will so adversely 
affect production that the interests 
of those who furnish the capital 
and who buy the product will be in 
jeopardy. 

The time has now arrived when 
encouragement must be given to 
the progressive evolution of indus- 
try from the state where labor hires 
itself out to capital, to the state 
where labor will manage the busi- 
ness and undertake the obligations 
which are necessary to insure those 
who have capital that they may 
safely lend it to the organization 



78 THE INDUSTRIAL REPUBLIC 

of those who labor, for the mutual 
benefit of both. 

The main cause of industrial un- 
rest is the ill-will of the laboring 
force. We have spent relatively too 
large an effort in the past to obtain 
the good-will of the customer and 
those who furnish the capital, and 
too little to obtain the good-will of 
labor. The time has come for a seri- 
ous consideration and some definite 
action toward the solution of this 
problem. Realizing the problem, 
the possible solutions will be many. 
Any real solution, however, must 
obtain the good-will and confidence 
of labor, and this can be done only 
by direct representation of labor in 
management. 



CHAPTER VIII 

THE GOODYEAR REPRESENTATION 
PLAN 

A PRACTICAL trial has been 
accorded some of the forego- 
ing principles of Industrial Repre- 
sentation by at least one American 
industrial concern of the first mag- 
nitude. 

The great force at the Akron 
factory of The Goodyear Tire & 
Rubber Company, constantly in- 
creasing during the past few years 
until it has reached the number of 
30,000 employees, made it very 
difficult for the management closely 
to follow the needs and desires of 
the men. 

A Labor Department to cover 
the usual subjects of welfare of em- 
ployees had been established for 



80 THE INDUSTRIAL REPUBLIC 

several years and had been per- 
forming its function as efficiently 
as possible, but still there was a 
feeling that many men did not avail 
themselves of this department to 
its fullest extent. 

It was felt that the best line of 
contact with the men would be to 
have them elect directly their own 
representatives to cooperate with 
the management. 

During April, 1919, it was de- 
cided to form a Council of Indus- 
trial Relations, composed of six 
factory executives, two men from 
the Labor Department, two men 
elected by the foremen, and six 
men elected from amongst the men 
themselves, to meet and try to for- 
mulate a plan of industrial repre- 
sentation. The factory was divided 
into precincts and by Australian 
ballot the members of an electoral 



THE INDUSTRIAL REPUBLIC 81 

college were elected, and these men 
in turn chose the employees 5 repre- 
sentatives to the Council of Indus- 
trial Relations. 

The first Council, composed of 
sixteen men, met weekly to discuss 
the problem and also investigate 
what had been done by other com- 
panies and associations along this 
line. They finally agreed unani- 
mously on an Industrial Represen- 
tation Plan for the Akron factories 
of the company. This plan provided 
as a basis of representation a form 
of citizenship in the industry, cre- 
ating a class known as "Industri- 
ans," or voting citizens of the fac- 
tory, composed of employees who 
had reached the age of eighteen 
years, who understood the English 
language, were American citizens, 
and had been in the employment of 
the company continuously for six 



82 THE INDUSTRIAL REPUBLIC 

months or more. This Industrial 
Representation Plan was submitted 
to a referendum vote of the Indus- 
trians of the factory, and also to 
the Board of Directors. It was ap- 
proved by the Industrians by Aus- 
tralian ballot, ninety-two per cent 
voting in favor. The Board of Di- 
rectors were unanimous in their 
approval, and it became effective 
on July 3, 1919, and is now in full 
operation in the factories at Akron. 
The Plan is as follows : 

INDUSTRIAL REPRESENTATION PLAN 

of the factory of 

The Goodyear Tire & Rubber Company 

Akron, Ohio 

The Council of Industrial Relations, composed 
of representatives elected by Goodyear men 
and women, foremen elected by Goodyear fore- 
men, and executives appointed by the Good- 
year Factory management, after having thor- 
oughly considered the subject of industrial 
representation for securing justice to both men 
and management through cooperative methods, 



THE INDUSTRIAL REPUBLIC 83 

has evolved the following plan for industrial 
cooperation at Goodyear, and presents this 
plan to Goody earites in the sincere belief that 
its acceptance by management and men of the 
Goodyear Factory will prove beneficial to all. 

1. Executive Powers 

All executive powers for operation of the 
Goodyear Factory shall be vested in the man- 
agement, and shall not be abridged in any way 
except in accordance with the legislative pow- 
ers granted in this Industrial Representation 
Plan. 

2. Legislative Powers 

All legislative powers granted in this Indus- 
trial Representation Plan shall be vested in an 
Industrial Assembly of the Goodyear Factory 
which shall consist of two (2) houses, namely, 
a Senate and a House of Representatives. 

3. The Industrial Assembly 

The Industrial Assembly shall be composed of 
forty (40) Representatives and twenty (20) 
Senators, elected by the Industrians of the 
Goodyear Factory, who shall meet separately 
or jointly, on the first Monday in each month 
in Goodyear Hall. Representatives shall be 
elected for one year, and Senators shall be 
elected for two years. 

Each Representative and each Senator shall 
have one vote. 



84 THE INDUSTRIAL REPUBLIC 

Each House shall vote independently of the 
other. 

Each House shall determine rules for its pro- 
ceedings and shall keep a record of its proceed- 
ings. 

4. Unit of Representation — Precinct 

and District 

The Goodyear Factory shall be divided into 
forty (40) precincts. Precincts shall be deter- 
mined so as to include substantially an equal 
number of people, and with due regard to de- 
partmental classification of the factory. 

Each precinct shall have the right to elect 
one Representative. 

The precincts shall be further arranged into 
groups of four, and each group shall be named 
a district, and each district shall have the right 
to elect two Senators. 

5. Method of Election and Recall of 

Senators and Representatives 

Election of Senators and Representatives 
shall be held in the Goodyear Factory annu- 
ally on the second Monday in October by se- 
cret ballot, and the Assembly shall be convened 
on the first Monday in November. At each an- 
nual election there shall be forty Representa- 
tives and ten Senators elected, except in the 
first election, when there shall be twenty Sen- 
ators elected. 

A Representative or Senator may be recalled 



THE INDUSTRIAL REPUBLIC 85 

on petition signed by two-thirds of the voters 
in his precinct or district, and approved by 
two-thirds of the House of which he is a mem- 
ber. 

Upon severance of employment with the 
Company, a Representative or Senator shall 
immediately and automatically cease to hold 
office. 

6. Qualifications of Representatives 
and Senators 

No person shall be a Representative who shall 
not have attained to the age of 21 years and 
who shall not be an Industrian of Goodyear, 
and not have had one year's continuous service 
record in the factory immediately prior to date 
of election. 

No person shall be a Senator who shall not 
have attained to the age of 25 years, and who 
shall not be an Industrian of Goodyear, and 
not have been in good standing on the pay-roll 
of The Goodyear Tire & Rubber Company for 
five years, the last two of which shall have been 
a continuous service record immediately prior 
to election. 

If vacancies in the seats of Representatives 
or Senators happen by resignation or other- 
wise, the one who shall have received the next 
highest number of votes from the precinct or 
district in which the vacancy shall have oc- 
curred shall fill the vacancy. 



86 THE INDUSTRIAL REPUBLIC 

7. Qualifications of Voters and 

Definition of Industrian 

A Goodyear Industrian must be 18 years of 
age, must be an American citizen, understand 
the English language, and have a six months' 
continuous service record in the Goodyear 
Factory immediately prior to election. Each 
Goodyear Industrian is entitled to vote. 

8. Power and Procedure of the 

Industrial Assembly 

The Articles of Incorporation of The Good- 
year Tire & Rubber Company and the laws 
of the State of Ohio fix the final authority and 
responsibility for management of the Com- 
pany in its Board of Directors. Therefore, sub- 
ject only to the right of the Board of Directors 
to veto or annul, the power of the Industrial 
Assembly shall be as follows : 

The Industrial Assembly shall have legisla- 
tive power to make changes in Factory Rules 
and Regulations which from time to time have 
been or shall be made by the management as 
provided in Article 1, on the subject of wage 
adjustments, working conditions, and the ad- 
justment of grievances in accordance with the 
following procedure: 

Every bill which shall have passed the House 
of Representatives and the Senate, shall, be- 
fore it becomes a Factory Rule or Regulation, 
be presented to the Goodyear Factory Man- 



THE INDUSTRIAL REPUBLIC 87 

ager. If he approves, he shall sign it, but if not, 
he shall return it with his objections to the 
House in which it shall have originated, who 
shall enter the objections at large upon their 
record, and proceed to reconsider it. If after 
such reconsideration, two-thirds of that House 
shall agree to pass the bill, it shall be sent, to- 
gether with the objections, to the other House, 
by which it shall likewise be reconsidered, and 
if approved by two-thirds of that House, it 
shall become a Factory Rule or Regulation. 
But in all such cases the votes of both Houses 
shall be determined by yeas and nays, and the 
names of the persons voting for and against the 
bill shall be entered on the record of each 
House respectively. If any bill shall not be 
returned by the Factory Manager within 
thirty days (Sundays excepted) after it shall 
have been presented to him, the same shall be 
a Factory Rule or Regulation in like manner 
as if he had signed it, unless the Assembly by 
failure to provide proper means to receive it 
shall prevent its return, in which case it shall 
not be a Factory Rule or Regulation. 

9. Approval and Veto Powers of the 
Factory Manager 

Every order, resolution, or vote, to which the 
concurrence of the Senate and House of Rep- 
resentatives may be necessary (except on a 
question of adjournment), shall be presented 
to the Factory Manager of the Goodyear Com- 



88 THE INDUSTRIAL REPUBLIC 

pany, and before the same shall take effect 
shall be approved by him, or being disap- 
proved by him, shall be repassed by two-thirds 
of the Senate and House of Representatives 
according to the rules and limitations in the 
case of a bill. 

10. Joint Conferences 

On matters of joint interest to men and man- 
agement, such as wage adjustments, working 
conditions, and the adjustment of grievances, 
joint conferences may be called where repre- 
sentatives of the men meet an equal number 
of representatives of the management. Fre- 
quent conferences are desirable for the consid- 
eration of constructive suggestions of mutual 
interest. 

11. Joint Conferences — How Formed 

The Industrial Assembly shall appoint six (6) 
Industrians, three from the Senate and three 
from the House of Representatives, and the 
Factory Management shall appoint six (6) 
Industrians to meet as a joint conference. 
Persons thus selected shall be duly accredited 
representatives of the Goodyear Factory men 
and management for consideration of and co- 
operation upon subjects of mutual interest. 
The Industrial Assembly shall maintain stand- 
ing committees composed of three members of 
each House to facilitate quick action in secur- 
ing a joint conference. 



THE INDUSTRIAL REPUBLIC 89 

12. Industrial Representation Plan — 
How Amended 
The Industrial Assembly, whenever two-thirds 
of both Houses shall deem it necessary, shall 
propose amendments to this Industrial Repre- 
sentation Plan, which shall be valid to all in- 
tents and purposes as a part of this plan when 
approved by the Factory Manager. In case 
amendments have been passed by a two-thirds 
vote of both Houses over the veto of the Fac- 
tory Manager, such amendments must be 
approved by the Board of Directors of The 
Goodyear Tire & Rubber Company before 
becoming valid. 

13. Oath of Office 
Before entering upon his duties, each Rep- 
resentative or Senator shall take and subscribe 
to the following oath which shall be adminis- 
tered by any officer empowered to administer 
oaths under the laws of Ohio: "I solemnly 
swear (or affirm) that I will faithfully support 
the Constitution and laws of the United States 
and the State of Ohio and the Industrial Rep- 
resentation Plan of the Goodyear Factory, and 
that I will to the best of my ability faithfully 
and conscientiously discharge the duties in- 
cumbent on me as a Representative (or Sena- 
tor) under such plan." 

14. Guarantee against Discrimination 
There shall be no discrimination against any 
Goodyearite on account of membership or 



90 THE INDUSTRIAL REPUBLIC 

non-membership in any labor organization, or 
against any Representative or Senator for ac- 
tion taken by him in performance of his duties 
as outlined in this Plan. 

15. Industrial Representation Plan — 
How Ratified 

This Industrial Representation Plan shall be- 
come effective when a majority of the Indus- 
trians of the Goodyear Factory and the man- 
agement of the Goodyear Factory shall have 
authorized the present Industrial Relations 
Council to place their signatures hereon. 

The first primary was held for 
nominations under the Australian 
ballot system on June 25, 1919, for 
the purpose of nominating three 
candidates for each office of Sena- 
tor and Representative. The first 
elections were held on July 2, 1919, 
and the new House and Senate 
assembled on July 8, 1919. 

The plan in operation at the 
Goodyear differs from most other 
plans in that it gives direct power 
and responsibility to the workers 



THE INDUSTRIAL REPUBLIC 91 

to a much greater extent than the 
Joint Conference Plan only, and 
also is designed so far as possible 
to prevent deadlocks. 

The executive power for opera- 
tion of the factory lies with the 
factory management, except as 
limited by the legislative powers 
granted to the workmen's assem- 
bly. 

In the working-out of the plan, 
things of mutual interest to both 
men and management are brought 
to the Joint Conference of six rep- 
resentatives from the management 
and six from the men. This body 
has been meeting regularly for the 
past six months, and in that time 
there has not been a single case of 
division where all the men's repre- 
sentatives were voting one way 
and the management's the other. 
Nearly every decision has been 



92 THE INDUSTRIAL REPUBLIC 

unanimous, and where there have 
been differences of opinion, in each 
case parts of both groups were vot- 
ing the same way. Many resolu- 
tions have been passed by the As- 
sembly for the benefit of the em- 
ployees and referred to their repre- 
sentatives to be taken up in Joint 
Conference, and most of these rec- 
ommendations have been put into 
effect. In case of disagreement, pro- 
duction does not stop, things go 
on as usual, and meanwhile the 
points of disagreement are referred 
to the Industrial Assembly for ad- 
justment by the regular procedure 
outlined in the plan. 

The Industrial Assembly has 
taken part in several civic mat- 
ters, secured better transportation 
facilities from the public service 
corporations, and has brought to 
the attention of the management 



THE INDUSTRIAL REPUBLIC 93 

many things for bettering working 
conditions which probably would 
not have become known except 
through the representatives of the 
men. Various sub-committees of 
the House and Senate are con- 
stantly working among the men, 
taking care of minor grievances 
which arise, to have them ad- 
justed on a fair basis. 

The Company has recently 
erected opposite its factory what 
is probably the largest and most 
comprehensive Industrial Institute 
for the mental and physical train- 
ing of its employees that has ever 
been attempted by industry, pro- 
viding opportunities for education 
in history, economics, civil gov- 
ernment, Goodyear policies and 
traditions, rubber manufacturing 
practice, salesmanship, and organ- 
ization and management, as well 



94. THE INDUSTRIAL REPUBLIC 

as affording opportunity for those 
who did not receive a complete edu- 
cation in the public schools to get a 
training in such subjects as are usu- 
ally taught in school, for which the 
employees feel a need. Also a de- 
partment of physical training is 
provided, with a fully equipped 
gymnasium, shower baths, bowling 
alleys, and recreational rooms, un- 
der a competent force of instruc- 
tors. The intention is to make of 
the Goodyear Institute a veritable 
industrial university. It is also in- 
tended that it shall perform the 
same functions toward building up 
the mental and physical ability of 
Industrians that the public school 
system is designed to do for citi- 
zens, as it is realized that the more 
fully the powers of government are 
extended to the majority, the more 
necessary it becomes that the ma- 



THE INDUSTRIAL REPUBLIC 95 

jority be capable of exercising the 
duties and responsibilities placed 
upon it. 

The whole effect of the plan up 
to date has been a general better 
understanding between all parties 
engaged in the industry. 



THE END 



CAMBRIDGE . MASSACHUSETTS 
U . S . A 



f*.*t< 



JVN 2 1 1900 



